Material Impacts on the Precision Machining Industry - December 2010

Pricing Tyranny: Low Utilization & Empty Pipeline
Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

Prices are up substantially over their price a year ago, from 30-58% - up by double digit percentages - with the exception of Coke. Both upside and downside risk are present when considering raw materials purchases and long term pricing on the products that we produce. While U. S. steel production in June was up 65% over a year ago, Chinese steel mill exports to the world increased 320% from June 2009 to June 2010. Washington promised “change,” but continues to do nothing.

The materials we track are up year to year from 30% to 58%. So how do you quote firm pricing?

Despite tepid demand and mills nowhere near capacity, price increases are legion. CF steel bars up $2.00 cwt in September. Up $2.00 in January. Looking at a $3.00/cwt increase Feb. 1 on sizes larger than 3” rd. Welcome to the "Land of High Beta"- (risk or variability). Our prices are very low compared to global prices, and so we have become the tail being "wagged"
by the global dog of demand. I call it Beta (risk) because you have risk both ways--if you buy and then prices fall, or fail to buy and get shut out of production. We believe that this variability and the rapid swings are going to be a normal component of our marketplace in the short and medium terms. In an era where both holding or not holding inventory can be a punishing event, now more than ever it pays to know your suppliers.

Read the complete December 2010 Material Impacts Report (PDF format) here.